EDITORIAL: Yahoo Japan-Google Deal Stirs Fairness Concerns

TOKYO (Nikkei)--The recent alliance between Yahoo Japan Corp. (4689), the nation's top Web portal, and U.S. search engine giant Google Inc. needs to be carefully monitored to ensure that fair competition is maintained in the Japanese market.

Under the deal, announced Tuesday, Yahoo Japan will use Google's search technology for its portal, giving the companies a combined share of more than 90% of Japan's online search and ad markets.

Yahoo! Inc., Yahoo Japan's U.S. parent, sought to tie up with Google in the online ad business two years ago but abandoned the plan after the U.S. Justice Department said the alliance would violate antimonopoly law.

The latest deal is already being slammed by search engines in Japan and overseas online ad agencies. But the Japan Fair Trade Commission is maintaining a hands-off stance on the grounds that even though Yahoo Japan will use Google's search engine technology, the two firms will continue to separately operate search and ad services.

Nevertheless, the alliance needs to be closely monitored, as the partners may begin offering similar services and share information.

Yahoo Japan insists that fair competition will not be hindered because it will step up its original search services, such those related to auctions. But even if search services remain separate, keen attention will be paid to how the two companies will coordinate ad operations.

For example, will they adjust ad fees as a result of using the same distribution system? The deal will give Google a new portal for its ad business. It is possible the partners will jointly determine the unit price of online ads.

The alliance will also enable Google to further enhance its competitive edge in search engine development.

U.S. software giant Microsoft Corp. has its own search engine technology but commands less than 3% of the Japanese market, while the No. 4 search service operator, affiliated with Nippon Telegraph and Telephone Corp. (9432), has already adopted Google's search engine technology.

Such technology is necessary for not only online ads but also electronic commerce and many other areas. A de facto search monopoly by a foreign firm in Japan is not good in terms of competition.

The development of search technologies has been hindered in Japan because the duplication of information for online searches had been considered a violation of the copyright law. Effective this year, however, a legal revision has removed such a barrier, making it more important than ever for the government to monitor the Yahoo Japan-Google tie-up.

The alliance will have a major impact on the Japanese search market once it gets fully under way. The Fair Trade Commission needs to closely monitor the companies' moves to ensure a fair competitive environment in Japan's online service market.

(The Nikkei July 29 morning edition)